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Geithner may be the face of Obama's economic agenda, Donovan walks into his own crisis: the housing meltdown.
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Treasury Secretary Timothy Geithner may be the public face of the Obama administration’s historic economic agenda.

But with a lower public profile, Housing and Urban Development Secretary Shaun Donovan has walked into his own massive crisis: the housing meltdown. Seen as one of the young stars in President Barack Obama’s Cabinet, Donovan, 43, faces several major challenges: falling home prices, a tsunami of foreclosures, and a demoralized, long-neglected federal institution.

POLITICO checked in with Donovan recently to talk about how his new job is going. Here are the highlights of the interview:

Mortgage cramdown legislation

Donovan is playing down the controversial cramdown provision as part of the overall housing plan, but he’s also not backing down from the proposal, which would allow judges to lower mortgage payments for people facing bankruptcy.

The House recently passed the bankruptcy provision as part of a larger housing package, but it doesn’t have the votes in the Senate, and Donovan has been up on the Hill, on both sides of the Capitol, to discuss the legislation with lawmakers. He stressed that the administration’s support for the bankruptcy change — dubbed cramdown by its critics — must be taken in context with the broader housing plan they’ve developed.

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“We see bankruptcy as a piece of the solution, but we also believe strongly if what we end up with is millions of homeowners seeking to be able to stay in their homes through bankruptcy court, that we’ve all failed,” Donovan said. “The focus of our plan has been to move upstream, if you will, and focus on catching borrowers as early as possible. We know from recent experience, once you’re 90 days delinquent or more, the chances of helping someone be successful ... is tougher.

“Let’s remember there are other critical provisions to the housing plan that are part of that legislation, and we don’t want to lose sight of that.”

But when asked if the administration would recommend dropping the bankruptcy piece from the bill should it prove a real obstacle to Senate passage, Donovan reiterated support for the measure: “The president has made clear that this is an important part of the overall package. We’re optimistic that there can be a resolution of the discussions in the Senate.”

When will it turn around?

The first sign of a turnaround that Donovan is looking for: a decline in the number of foreclosures.

After that he’s looking for an increase in the number of loan modifications. Encouraging lenders to modify rather than foreclose on home mortgages was a key goal of the administration’s plan.

“The plan was announced in February, but the guidance went out in early March,” Donovan said. “We are in the process of implementing it now with [mortgage] servicers, getting systems in place. And now that we have detailed guidance — which we got out very quickly, within two weeks of the president’s announcement — we’re now seeing the servicers gear up and put all the systems in place.”

He pointed to recent figures for housing permits and housing starts, which saw their first uptick in a long time — and he hopes it’s a sign of a longer-term trend.

“It’s too soon to know if that’s true but, certainly, better-than-expected numbers in one month are a good thing, relative to the alternative.”

Donovan also said the $787 billion stimulus has an important role in the administration’s effort to fix the housing market. “While the housing crisis may have started as a mortgage crisis, one of the most significant things driving foreclosures at this point is job loss and reduction in wages,” he said. “So all of these things work together. And it’s why, even in such a short time, we’ve moved so quickly as an administration and so comprehensively to try to deal with all the issues that we’re facing.”

The Blago case should focus the mind on Obama's promised big government programs- which have always been likely to encourage corruption. His plan to flood state and local governments with money for "affordable housing" will surely empower corrupt politicians and union bosses.

These programs are to be approached with caution after what was heard in Blago's words on the FBI tapes- demanding $1M in campaign donations from the cement company who won the contract for the "green lanes" and other improvements to the Illinois Turnpike.

And we should examine carefully Obama's similar programs in Illinois- where he helped get money approved for (convicted felon and major Obama fundraiser) Tony Rezko to build and maintain "affordable housing" in Barack’s district. Scandalously, much of the resulting "housing" is a joke, uninhabitible due to substandard work. People freeze in the winter, plumbing leaks, and a 3 year old boy was crushed to death by shoddy construction that collapsed.

Such proposals demonstrate how Democrats wrap spending that benefits nefarious supporters in an aura of social/environmental responsibility. Obama isn't even looking for the best possible proven solutions, he's using the economic crisis as an excuse to ram-through his big-government, socialist agenda... and send some cash to dubious allies, like slumlord Rezko.

The Blago case should focus the mind on Obama's promised big government programs- which have always been likely to encourage corruption. His plan to flood state and local governments with money for "affordable housing" will surely empower corrupt politicians and union bosses.

These programs are to be approached with caution after what was heard in Blago's words on the FBI tapes- demanding $1M in campaign donations from the cement company who won the contract for the "green lanes" and other improvements to the Illinois Turnpike.

And we should examine carefully Obama's similar programs in Illinois- where he helped get money approved for (convicted felon and major Obama fundraiser) Tony Rezko to build and maintain "affordable housing" in Barack’s district. Scandalously, much of the resulting "housing" is a joke, uninhabitible due to substandard work. People freeze in the winter, plumbing leaks, and a 3 year old boy was crushed to death by shoddy construction that collapsed.

Such proposals demonstrate how Democrats wrap spending that benefits nefarious supporters in an aura of social/environmental responsibility. Obama isn't even looking for the best possible proven solutions, he's using the economic crisis as an excuse to ram-through his big-government, socialist agenda... and send some cash to dubious allies, like slumlord Rezko.

President Obama should and his people should take another look at the Mortgage Bill that was rejected by Congress this past wk . Many who are in need of Bankruptcy asst. from Bankruptcy Judges were already in Bankruptcy before the Bank meltdown. There are many who are in bankruptcy who need to refinance their mortgages because they are set to have a rate hike next year and would benifit from having one mortgage instead to first and second loans{interest only-second}. This would allow many to stay in their homes and not have to strugle because on many different reasons . There are many people who want to stay in their homes and Congress's ties to the Banking business should not stop these people from getting help . It is all about the people not the Banks . Senator Durbin stated on tv the other day that as many as 12 Senators voted against the cramdown bill . President Obama should overide this no vote and help those who really need the help to stay in their homes .Loobyists should not be allowed to ask for bail out money from the Government then turn around a lobby congress with money bribes . There should be a law written baring lobbyist out of Washington buying power and influence . This is why our nation is in the trouble it is in. Every Banker that took money and used it for reasons. other than fixing their negative balance sheets should give the money back or go to jail